2 commodity ETFs to take advantage of another energy price spike

Oil and gas prices have been in a bull market since the start of 2021. However, commodities have only reached record highs this year, propelled by geopolitical tensions and heightened uncertainty in oil markets. energy.

At the time of publication, is trading above $108 a barrel, while the US West Texas Intermediate rises above $103. Moreover, the prices hover around $6.8.

Since January, the jumped 43.7%.

Dow Jones Oil & Gas Weekly Chart

Nevertheless, the current outlook for the energy sector for 2022 remains mixed. Despite tailwinds, the sector also faces some uncertainties, including slowing Chinese economic growth, rising geopolitical risks and disagreements among OPEC members.

A recent Deloitte study suggests that high oil prices will allow oil and gas (O&G) companies to increase their plans to transition to alternative energy sources. The research suggests:

“76% of O&G executives surveyed say oil prices above $60 a barrel will most likely boost or complete their energy transition in the near term.”

Today’s article features two exchange-traded funds (ETFs) that might appeal to readers looking to profit from a continued rise in energy prices.

1. First Trust Energy AlphaDEX Fund

  • Current price: $16.50
  • Range of 52 weeks: $9.44 – $16.63
  • Dividend yield: 0.92%
  • Spending rate: 0.64% per year

the First Trust Energy AlphaDEX® Fund (NYSE:) invests in energy stocks according to several criteria of value and growth. The fund was launched in May 2007.

FXN Weekly Chart

FXN, which tracks the StrataQuant® Energy Index, currently has 37 holdings. When it comes to sub-sectors, we see Oil, Gas & Coal (91.92%) and Alternative Energy (8.08%).

The top 10 stocks in the portfolio represent more than 45% of the $1.72 billion in net assets. Among these are Hesse (NYSE:); Continental Resources (NYSE:), western oil (NYSE:); EOG Resources (NYSE:); and Diamondback Energy (NASDAQ:).

The ETF is up 38.4% this year and 67.4% over the past 12 months. FXN hit a multi-year high on April 19. Trailing P/E and P/B ratios of 19.66x and 2.45x, respectively. Energy bulls might consider researching the names in the portfolio.

2. Invesco Optimum Yield Diversified Commodity Strategy Non K-1 ETF

  • Current price: $18.77
  • 52 week range: $13.22 – $22.73
  • Expense ratio: 0.68% per year

Commodity prices have skyrocketed. Recent research from Capital Economics strong points:

“Russia and Ukraine are major exporters of raw materials. Regardless of the outcome of the war, we suspect prices will remain high for some time.

Yet the analysis also suggests that a potential “slowdown in Chinese demand for commodities” is likely to weigh on commodity prices in the months ahead.

Our second fund, the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (NASDAQ:) offers exposure not only to energy commodities, but also to metals and agricultural commodities. This actively traded ETF invests primarily in commodity futures. Therefore, commodity bulls looking to diversify across the board may find PDBC worth investigating.

PDBC Weekly Chart

The fund began trading in November 2014 and assets under management are $8.7 billion. The benchmark for PDBC is the DBIQ Optimum Yield Diversified Commodity Index Excess Return, which includes a range of commodities.

They include (in order of weighting) , , , NY Harbor ULSD, Brent Crude, , WTI Crude, Natural Gas, , , , , , and .

So far in 2022, PDBC has returned over 33.5%. For more than a year, commodity prices have been volatile but generally solid. We believe geopolitical concerns and realities are likely to keep the positive momentum for most commodities intact.

Thus, this fund might appeal to readers who are bullish not only on oil and gas but also on other commodities. However, as an asset class, commodities are volatile. Therefore, some profit taking could occur soon, which would mean a better entry point for buy-and-hold investors.

About Mallory Brown

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